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What is Sole Proprietorship?

A sole proprietorship is a simple type of business structure that is owned and operated by the same person. It does not involve many of the complex filing requirements associated with other types of business structures such as corporations. Sole proprietorships allow persons to report business income and expenses on their individual tax returns.

Sole proprietorships are attractive to small investors because they are relatively easy to start up. Also,the owner is entitled to all the profit that the sole proprietorship collects. On the other hand, sole proprietorships can be risky because there is no separation between the owner and the business.

In other words, the owner remains personally liable for any losses or debts that the sole proprietorship incurs. They can also be held legally responsible for violations committed by the business or its employees. A sole proprietorship can best be summed up by the phrase, "You are the business."

Advantages of a Sole Proprietorship

In other words, the owner remains personally liable for any losses or debts that the sole proprietorship incurs. They can also be held legally responsible for violations committed by the business or its employees. A sole proprietorship can best be summed up by the phrase, "You are the business."

• Ease of formation: Starting a sole proprietorship is much less complicated than starting a formal corporation, and also much cheaper. Some states allow sole proprietorships to be formed without the double taxation standards applicable to most corporations. The proprietorship can be named after the owner, or a fictitious name can be used to enhance the business marketing.
• Tax benefits: The owner of a sole proprietorship is not required to file a separate business tax Instead, they will list business information and figures within their individual tax return. This can save additional costs on accounting and tax filing. The business will be taxed at the rates applied to personal income, not corporate tax rates.
• Employment: Sole proprietorships can hire employees. This can lead to many of the benefits associated with job creation, such as tax breaks. Also, spouses of the business owner can be employed without having to be formally declared as an employee. Married couples can also start a sole proprietorship, though liability can only assumed by one individual.
• Decision making: Control over all business decisions remains in the hands of the owner. The owner can also fully transfer the sole proprietorship at any time as they deem necessary.

Disadvantages of Sole Proprietorships

Forming a sole proprietorship does involve some risks, mainly to the owner of the business, as legally speaking they are not treated separately from the business. Some disadvantages of sole proprietorships are:

• Liability: The business owner will be held directly responsible for any losses, debts, or violations coming from the business. For example if the business must pay any debts, these will be satisfied from the owner’s own personal funds. The owner could be sued for any unlawful acts committed by the employees. This is drastically different from corporations, wherein the members enjoy limited liability (i.e., they cannot be held liable for losses or violations)
• Taxes: While there are many tax benefits to sole proprietorships, a main drawback is that the owner must pay self-employment taxes. Also, some tax benefits may not be deductible, such as health insurance premiums for employees
• Lack of “continuity”: The business does not continue if the owner becomes deceased or incapacitated, since they are treated as one and the same. Upon the owner’s death, the business is liquidated and becomes part of the owner’s personal estate, to be distributed to beneficiaries. This can result in heavy tax consequences on beneficiaries due to inheritance taxes and estate taxes.
• Difficulty in raising capital: Since the initial funds are usually provided by the owner, it can be difficult to generate capital. Sole proprietorships do not issue stocks or other money-generating investments like corporations do.

So, while sole proprietorships do not necessarily create more liabilities, they do expose the business owner to a risk of being sued. Lawsuits can be filed against the business owner for legal violations, as well as to collect any outstanding debts.

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Sole Proprietorship Firm

Proprietorship is an alias for the Proprietor to do business. Proprietorships are ideal for very small businesses in the unorganised sector.
Sole Proprietorship Firm Registration is Single Person Firm Registration i.e is the main objective is Open Current Bank Account on the Name of Business so it's a simply firm which is enable doing business in India with Less Compliance and Less Costing. a Sole Proprietorship Firm require minimum 2 Legal Entity Proof for open a Current Bank Account.

Two Legal Entity Proof for the Sole Proprietorshiop Firm in India:

Option 1: MSME Registration Certificate + Chartered Accountant Business Certification. (It's accept by only some co operative and small banks. Confirm with your bank for the same).

Option 2: GST Registration which is required in below anyone conditions -

1. Deal inter state sales or services
2. Ecommerce or internet based business.
3. Trader or Retailer or MFG or Aggregator
4. Within state have more than 20 lakh rupees turnover.

* Turnover limit of the GST is applicable only in within state.

Documents Required for Sole Proprietorship Firm:

• PAN Card copy of the Proprietor.
• Aadhar Card copy of the Proprietor.
• Alternative on Aadhar Card : Voter Id | Passport | Driving License.
• Firm Address Proof: Electricity Bills copy or gas bill or phone bill etc. (No issues if its on other name)

For the GST additional:

• Passport Size Photogroph
• Personal Bank Account Cancel Cheque or Bank Statement or Passbook Front Page anyone.

Timeline for the Sole Proprietorship Firm Registration :

• MSME + CA Certification | 2-6 days avg from working on the assignment.
• GST Registration | avg 7 days from working on the assignment.

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FAQ Series on the Sole Proprietorship Firm?

1. Does its required the commerical proeprty or office for the Registration ?

No, you can register on your residential property also, wheather its a rented or own property. you need just utility bills copy with permission from your landlord or owner of the premise.

2. NOC is required in rental or own property case ?

If the bill copy is on the another person name then yes No Objection Certificate is required & formated is shared by us on later stage.

3. Can I keep any name of the Firm ?

Yes, you can keep any name of the Firm. its not realted to the private limited company or llp or opc etc. you have to keep name without any extension. for ex - myonlineca technologies.

4. Can I register the firm on my family member name ?

Yes, you can register your firm on your family member name if you have any objection. its required the same docs which mentioned above.